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Stocks fell sharply on Friday as intensifying speculative trading by retail investors continued to trouble the market.
The Dow Jones Industrial Average lost 720 points, or 2.4%, to drop below 30,000 points. The 30-stock benchmark is on track to post its worst day since October. The S&P 500 fell 2.4% and the Nasdaq Composite slipped 2.6%, Apple fell 4.7% and other big names in tech slipped.
GameStop shares jumped more than 70% after trading app Robinhood said it would allow limited purchase of stock and other heavily bypassed names after restricting access the day before .
Robinhood raised over $ 1 billion from its existing investors overnight, in addition to tapping into bank lines of credit, to ensure it had the capital to allow stocks to trade again. volatiles like GameStop.
Investors fear that if GameStop continues to rise in such a volatile fashion, it could spill over into financial markets, causing losses to brokers like Robinhood and forcing hedge funds that bet against the stock to sell other securities for raise cash.
There are also concerns that the GameStop mania is a sign of a bigger bubble in the market and that its erasure could also cause turmoil and hit retail investors hard. A number of lawmakers have also called for an investigation into the chaotic trade. The Securities and Exchange Commission said Friday it would review the actions of the regulated body to find out if the decisions made by disadvantaged investors.
“There is far too much leverage in the system, and we’re starting to see signs that this excessive leverage is going to be unwound in a way that will create headwinds for the stock market and other risky assets for longer. just a few days, ”said Matt Maley, chief market strategist at Miller Tabak.
Meanwhile, the results of new trials of Johnson & Johnson’s coronavirus vaccine have disappointed some investors, weighing on the broader market. Stocks had reached record levels in hopes that vaccines would be effective against Covid-19 to allow for a smooth economic reopening before the end of the year. New mutations that are more resistant to vaccines could upset these optimistic prospects for investors.
It has been a volatile week on Wall Street. The Dow Jones lost more than 600 points on Wednesday, suffering its worst sell-off in three months. Then the blue chip benchmark rebounded 300 points on Thursday in a large market rally.
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